Is Concho Resources Inc. (NYSE:CXO) Overpaying Its CEO?

June 13, 2020

In 2006, Tim Leach was appointed CEO of Concho Resources Inc. (NYSE:CXO). First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Concho Resources

How Does Tim Leach's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Concho Resources Inc. has a market cap of US$11b, and reported total annual CEO compensation of US$13m for the year to December 2019. That's below the compensation, last year. We think total compensation is more important but we note that the CEO salary is lower, at US$1.1m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$12m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Concho Resources. On a sector level, around 19% of total compensation represents salary and 81% is other remuneration. It's interesting to note that Concho Resources allocates a smaller portion of compensation to salary in comparison to the broader industry.

So Tim Leach receives a similar amount to the median CEO pay, amongst the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. You can see, below, how CEO compensation at Concho Resources has changed over time.

NYSE:CXO CEO Compensation June 14th 2020

Is Concho Resources Inc. Growing?

On average over the last three years, Concho Resources Inc. has shrunk earnings per share by 83% each year (measured with a line of best fit). It achieved revenue growth of 2.7% over the last year.

Sadly for shareholders, earnings per share are actually down, over three years. And the modest revenue growth over 12 months isn't much comfort against the reduced earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Concho Resources Inc. Been A Good Investment?

Given the total loss of 50% over three years, many shareholders in Concho Resources Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Tim Leach is paid around what is normal for the leaders of larger companies.

Returns have been disappointing and the company is not growing its earnings per share. Suffice it to say, we don't think the CEO is underpaid! On another note, we've spotted 1 warning sign for Concho Resources that investors should look into moving forward.

If you want to buy a stock that is better than Concho Resources, this free list of high return, low debt companies is a great place to look.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.

mitchell_lawler

Micron (MU) is booming, and it still doesn't look ‘expensive’ based on next year's earnings. So why does our own valuation say it could be worth 40% less?

2613

zoe_vi5fn3d

A low price to earnings ratio at the top of the cycle is a warning rather than a bargain, and a terrifyingly high one at the bottom is often the entry point

darius_xnnrd3d

Memory used to have a dozen participants racing each other into oversupply, and now it has three. High bandwidth memory is qualified into customer designs years ahead, sold under long-term agreements, and is far harder to switch away from than commodity DRAM.